BILL ANALYSIS
AB 1602
Page 1
Date of Hearing: April 20, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 1602 (John A. Perez) - As Amended: April 15, 2010
SUBJECT : Health care coverage.
SUMMARY : Enacts the California Patient Protection and
Affordable Care Act to implement reforms under the federal
Patient Protection and Affordable Care Act (Affordable Care Act)
in California. As such, prohibits group or individual health
care service plans or health insurers (collectively carriers)
from establishing lifetime or unreasonable annual limits on the
dollar value of benefits. Requires carriers to provide minimum
coverage for specified preventive services. Prohibits carriers
from imposing preexisting condition exclusions for enrollees or
insureds under 19 years of age. Prohibits the limiting age for
dependent health care coverage to be less than 26 years of age.
Creates the California Health Benefit Exchange (Exchange) for
the purchase of health care coverage. Specifically, this bill :
Lifetime Limits
1)Prohibits carriers, effective September 23, 2010, from
establishing lifetime limits on the dollar value of benefits
for any participant or beneficiary. With respect to plan
years prior to January 1, 2014, permits a group or individual
health care service plan contract, after September 23, 2010,
to only establish a restricted annual limit for the scope of
benefits that are "essential health benefits" under the
Affordable Care Act, with prior approval from by United States
Secretary of Health and Human Services (DHHS).
Minimum Coverage for Preventive Services
2)Requires carriers, effective September 23, 2010 and subject to
the minimum interval established by DHHS Secretary pursuant to
the federal Affordable Care Act, to provide coverage, without
any cost sharing requirements, for:
a) Immunizations that have in effect a recommendation from
the Advisory Committee on Immunization Practices of the
federal Centers for Disease Control and Prevention.
b) Evidence-informed preventive care and screenings for
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infants, children, adolescents, and women provided for in
the comprehensive guidelines supported by the federal
Health Resources and Services Administration and other
services that meet federal standards, as specified.
3)Prohibits anything in this bill from being construed to
prohibit a plan from providing coverage for services in
addition to those recommended by the United States Preventive
Services Task Force or to deny coverage for services that are
not recommended.
Prohibition against Pre-existing Conditions
4)Prohibits health plans, effective September 23, 2010, from
imposing any preexisting condition exclusion with respect to
coverage under the plan of any enrollee under 19 years of age.
5)Exempts health plan contracts or health insurance policies
that are not required to provide essential health benefits, as
defined, from this provision.
Dependent Coverage
6)Prohibits the limiting age for dependent health care coverage
to be less than 26 years of age, except as specified.
7)Prohibits the limiting age provision from requiring specified
public employers to pay the cost of coverage for dependents
who between 23 and 26 years of age. Permits employees of
those entities to elect to provide coverage to dependents
between 23 and 26 years of age, provided they contribute the
premium for that coverage.
8)Requires employment contracts subject to collective bargaining
that are issued, amended, or renewed on or after September 23,
2010 to be subject to the limiting age provisions. Exempts
employment contracts subject to collective bargaining that are
effective prior to September 23, 2010 from this provision.
The Exchange
9)Creates the Exchange, governed by an executive board
consisting of an unspecified number of members, to be
appointed by the Governor, the Senate Committee on Rules, and
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the Speaker of the Assembly. Requires the board to be
responsible for using the funds awarded by DHHS for the
planning and establishment of the Exchange.
10)Requires the board to, at a minimum:
a) Implement procedures for the certification,
recertification, and decertification, consistent with
guidelines established by DHHS, of health plans as
qualified health plans;
b) Provide for the operation of a toll-free telephone
hotline to respond to requests for assistance;
c) Maintain an Internet Web site through which enrollees
and prospective enrollees of qualified health plans may
obtain standardized comparative information on such plans;
d) Assign a rating to each qualified health plan offered
through the Exchange in accordance with the criteria
developed by the Secretary;
e) Utilize a standardized format for presenting health
benefits plan options in the Exchange, including the use of
the uniform outline of coverage established under the
federal Patient Protection and Affordable Care Act ;
f) Inform individuals of eligibility requirements for the
Medi-Cal Program, the Healthy Families Program, or any
applicable state or local public program, and if through
screening of the application, the Exchange determines that
such individuals are eligible for any such program, enroll
such individuals in such program;
g) Establish and make available by electronic means a
calculator to determine the actual cost of coverage after
the application of any premium tax credit and any cost
sharing reduction, as specified;
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h) Grant a certification attesting that, for purposes of
the individual responsibility penalty under existing
federal law, an individual is exempt from the individual
requirement or from the penalty imposed because:
i) There is no affordable qualified health plan
available through the Exchange, or the individual's
employer, covering the individual; or
ii) The individual meets the requirements for any other
such exemption from the individual responsibility
requirement or penalty;
i) Transfer specified information to the Secretary of the
Treasury; and
j) Provide to each employer the name of each employee who
ceases coverage under a qualified health plan during a plan
year (and the effective date of such cessation).
11)Permits the board, consistent with the standards,
regulations, and rules promulgated by DHHS, to:
a) Determine eligibility, enrollment, and disenrollment
criteria and processes for enrollees and potential
enrollees in the Exchange;
b) Determine participation requirements, standards, and
selection criteria for qualified health plans, including
reasonable limits on a plan's administrative costs;
c) Determine when an enrollee's coverage commences and the
extent and scope of coverage;
d) Determine premium schedules, collect the premiums, and
administer subsidies to eligible enrollees and rates paid
to participating plans;
e) Determine rates paid to qualified health plans;
f) Provide for the processing of applications and the
enrollment and disenrollment of enrollees;
g) Determine and approve the cost-sharing provisions for
qualified health plans;
h) Conduct various administrative functions;
i) Maintain enrollment and expenditures to ensure that
expenditures do not exceed the amount of revenues in the
fund, and if sufficient revenue is not available to pay
estimated expenditures, institute appropriate measures to
ensure fiscal solvency; and,
j) Share information with the Employment Development
Department for the purpose of the administration and
enforcement of the Exchange.
12)Requires the Exchange to facilitate the purchase of qualified
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health plans to qualified individuals and qualified employers
by January 1, 2014.
California Health Trust Fund
13)Creates the California Health Trust Fund (Fund) in the State
Treasury for the purpose of this bill. Requires all moneys in
the Fund to be continuously appropriated without regard to
fiscal year and permits any unexpended or unencumbered moneys
in the Fund to be carried forward.
14)Requires the board to establish and maintain a prudent
reserve in the Fund.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
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COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, given the
recent passage of the Affordable Care Act, California must
begin the important task of implementing federal law. Several
of the federal health reform provisions take effect this year,
including the change in the limiting age, the ban on lifetime
limits, and the end of pre-existing condition exclusions for
children. This bill is a necessary first step towards
enacting these important insurance market reforms.
Additionally, federal health reform tasks the states with
establishing the new, organized marketplaces where individuals
and small businesses can more readily identify and compare
coverage choices; purchase value based coverage, and access
premium credits and cost sharing subsidies. This bill
establishes the California Health Benefit Exchange to enact
these key changes, and sets in motion the necessary duties to
ensure California can quickly use the federal planning dollars
and commence operations by January 1, 2014.
2)FEDERAL HEALTH CARE REFORM . On March 23, 2010, President
Obama signed the Affordable Care Act; P. L. 111-148, as
amended by the Health Care and Education Reconciliation Act of
2010; P. L. 111-152. Among other provisions, the new law
makes statutory changes affecting the regulation of and
payment for certain types of private health insurance. There
are a number of health insurance provisions that will take
effect in 2010, including those related to this bill:
Young Adults on Parents' Health Plans. Young adults may stay
on their parents' health plans to age 26, effective September
2010. The provision applies to all health plans, and does not
exclude young adults who are married.
Prohibition on Preexisting Condition Exclusions for Children.
Insurers are prohibited from excluding coverage of preexisting
conditions for children in the individual market, effective
six months after enactment. According to a March 28, 2010 New
York Times news article, just days after the President signed
the Affordable Care Act, there was a dispute over the language
in the law regarding the pre-existing conditions coverage
provisions. The New York Times article stated that while
insurers agreed that health insurance carriers offering
individual or group coverage were unable to impose preexisting
condition exclusions beginning in September, insurers
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initially disagreed that the law required them to write
insurance at all for the child or family, providing what they
call in the insurance world "guaranteed issue" until 2014.
The Secretary of DHHS issued clarification in a letter to the
president of America's Health Insurance Plans (AHIP) stating
that, "To ensure that there is no ambiguity on this point, I
am preparing to issue regulations in weeks ahead ensuring that
the preexisting condition exclusion applies to both a child's
access to a plan and his or her benefits once he or she is in
the plan." The Secretary further noted that regulations would
make clear that by September, "children with pre-existing
conditions may not be denied access to their parents' health
insurance plans." In response, AHIP's president wrote to the
Secretary that AHIP would accept the clarification of the new
law and, fully comply with it.
Prohibitions Against Lifetime Benefit Caps. Group health
plans or insurance companies providing group or individual
market coverage are prohibited from setting lifetime limits on
the dollar value of benefits and from setting unreasonable
annual limits on the dollar value of benefits, effective six
months after enactment. Annual limits will be banned
completely in 2014.
3)STATE INSURANCE EXCHANGES . Each state is required to establish
an American Health Benefit Exchange and a Small Business
Health Options Program Exchange by 2014 for individuals and
small employers with 50 to 100 employees; after 2017, states
have the option of opening the small business exchange to
employers with more than 100 employees. States can opt to
provide a single exchange for individuals and small employers.
Groups of states can form regional exchanges or states can
form more than one in-state exchange, but the exchanges must
serve a geographically distinct area. While the individual
and small-group markets will not be replaced by the exchanges,
the same market rules will apply inside and outside the
exchanges. Premium subsidies can be used only for plans
purchased through the exchanges. If DHHS determines in 2013
that a state will not have an exchange operational by 2014,
DHHS is required to establish and operate an exchange in the
state. In 2017, states will have the opportunity to opt out
of the federal requirements to establish insurance exchanges
through a five-year waiver, if they are able to demonstrate
that they can offer all residents coverage at least as
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comprehensive and affordable as that required by this bill.
Federal responsibilities. DHHS' responsibilities with respect
to the exchanges include: establishing certification criteria
for "qualified health plans" that will be sold through the
exchanges; requiring such plans to provide the essential
benefits package; requiring that the licensed insurance
carriers issuing plans offer at least one qualified health
plan at the silver and gold levels and meet marketing
requirements; ensuring a sufficient choice of providers; and,
ensuring that essential community providers are included in
networks, are accredited on quality, implement a quality
improvement strategy, use a uniform enrollment form, present
plan information in a standard format, and provide data on
quality measures. In addition, the Secretary will develop a
rating system for qualified health plans and a model template
for an exchange's Internet portal, and determine an initial
and open enrollment period as well as special enrollment
periods for people under varying circumstances. The Secretary
is also required to establish procedures under which states
may allow agents or brokers to enroll individuals in qualified
health plans and assist them in applying for subsidies. Such
procedures may include the establishment of rate schedules for
broker commissions paid by health plans offered through the
exchange.
State responsibilities. The state exchanges will be required
to certify qualified health plans, operate a toll-free hotline
and Web site, rate qualified health plans, present plan
options in a standard format, inform individuals of the
eligibility requirements for Medicaid and the Children's
Health Insurance Program, provide an electronic calculator to
calculate plan costs, and grant certifications of exemption
from the individual requirement to have health insurance.
Exchanges will be required to be self-sustaining by 2015 and
will be allowed to charge assessments or user fees to
participating health insurance issuers or otherwise generate
funding to support their operations. The exchanges also will
award grants to "navigators" who will educate the public about
qualified health plans, distribute information on enrollment
and subsidies, facilitate enrollment, and provide referrals on
grievances. Navigators may include trade and professional
organizations, farming and commercial fishing organizations,
community and consumer-focused nonprofit groups, chambers of
commerce, unions, or licensed insurance agents or brokers.
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Qualified employers purchasing through the exchange.
Employers that are qualified to offer coverage to their
employees through the exchange may provide premium support for
a level of coverage (bronze, silver, gold, platinum) and
employees may choose a plan within the designated level.
4)RELATED LEGISLATION . There are a number of bills related to
the implementation of federal health care reform in
California:
AB 1595 (Jones) commencing January 1, 2014, to the extent
required by the Affordable Care Act, requires persons who
meets all other applicable eligibility requirements to be
eligible for benefits under the Medi-Cal program if his or her
income does not exceed 133% of the federal poverty level. AB
1595 is set for hearing on April 20, 2010 in the Assembly
Health Committee.
AB 1887 (Villines) establishes the state temporary high risk
pool program in order to be eligible for high risk pool funds
under the Affordable Care Act. AB 1887 is set for hearing on
April 20, 2010 in the Assembly Health Committee.
AB 2345 (De La Torre) requires carriers, after January 1,
2011, to meet the requirements of specified provisions of the
federal Public Health Service Act, related to federal health
care reform. AB 2345 is set for hearing on April 20, 2010 in
the Assembly Health Committee.
AB 2244 (Feuer) among other things, prohibits carriers from
denying coverage on the basis of an actual or expected health
condition effective January 1, 2011 for children and effective
January 1, 2014 for adults. AB 2244 is set for hearing on
April 20, 2010 in the Assembly Health Committee.
AB 2477 (Jones) deletes the provision that requires Mid-Year
Status Reports for children from January 1, 2011 to July 1,
2012, therefore establishes continuous eligibility for
children in the Medi-Cal Program. AB 2477 is pending in the
Assembly Appropriations Committee.
SB 900 (Alquist) establishes the California Health Benefits
Exchange within the California Health and Human Services
Agency and would requires the Exchange to, among other things,
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implement specified functions imposed by the Affordable Care
Act. SB 900 is set for hearing in the Senate Health Committee
on April 21, 2010.
SB 1088 (Price) prohibits, with a specified exceptions, the
limiting age for dependent children from being less than 27
years of age. SB 1088 is set for hearing in the Senate Health
Committee on April 21, 2010.
5)PREVIOUS LEGISLATION . AB 8 (Nunez) of 2007 and AB 1 X1
(Nunez) of 2007, would have established a comprehensive
package of health care reforms, including creating a statewide
health care purchasing program (California Health Insurance
Purchasing Program, or Cal-CHIPP); modifying rules governing
private individual and group health insurance; initiating and
expanding health care quality and cost measurement activities;
and establishing administrative and funding mechanisms to
support the reforms. AB 8 (Nunez) was vetoed by Governor
Schwarzenegger and AB 1 X1 failed passage in the Senate Health
Committee.
6)SUPPORT . The California Retired Teachers Association, writing
in response to a previous version of this bill, writes that
this bill will provide clarity and structure for implementing
the new federal health care reform legislation.
7)SUPPORT IF AMENDED . The California Chiropractic Association
requests and amendment to include chiropractic care as a
coverage option.
8)CONCERNS . Health Net, writing in response to a previous
version of this bill, states that they will work collaborative
with the Legislature and regulators to implement federal
health care reform, including the creation of an exchange.
Health Net further states that their preliminary review of
this bill found that there are some provisions that do not
follow the authority as set forth in federal health care
reform. The California Association of Health Plans (CAHP),
also writing in response to a previous version of this bill,
states that this bill includes a number of provisions that
point towards an Exchange that is intended to be at its core,
a purchaser of services. CAHP states that they are still
formulating their opinion on this concept and many other
aspects of the bill.
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9)OPPOSITION . Anthem Blue Cross, writing in response to a
previous version of this bill, states that this bill will
limit consumer choice and set up onerous rate setting
requirements. Anthem further states that this bill would not
establish an exchange that meets the requirements of the
Affordable Care Act while maintaining a functional health
insurance market place and ensuring consumer choice.
REGISTERED SUPPORT / OPPOSITION :
Support
California Retired Teachers Association
Opposition
Anthem Blue Cross
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097